Mike Naylor, personal finance expert at uSwitch.com, comments on three major credit card companies appealing to the House of Lords yesterday to clarify if Section 75 of the Consumer Credit Act 1974 (S.75) applies to credit card purchases made overseas.
Background
Section 75 of the Consumer Credit Act 1974 is a valuable piece of legislation that has been in existence for more than 30 years. It protects consumers that make credit card purchases in the UK and, through a series of recent court battles; it now also covers overseas purchases of between £100 and £30,000. The appeal will once again clarify if foreign transactions are covered by this section of the Act. The protection consumers currently receive covers issues such as a company going bust, providing faulty goods or failure to send goods back to the UK. S.75 makes card companies jointly liable with retailers against breach of contract or misrepresentation. This has long been a matter that credit card suppliers have been unhappy with.
“Given UK consumers spent £16.4 billion abroad last year on credit and debit card transactions, the protection currently offered by S.75 on credit cards is invaluable. The vast majority of providers already impose foreign exchange rate loading of around 2.65% or 2.75% for consumers that use their credit card abroad which by far exceeds the costs incurred by the provider. This has made the process expensive whilst ensuring providers recoup any losses they suffer from the few claims that are made. With consumers already paying this premium to use their credit card overseas, arguably they are indirectly funding the extra protection offered.
“In the last month alone, a number of credit card suppliers have increased fees. For example LV= introduced a 3% foreign exchange rate loading fee, ending one of the cards best-selling points as they previously charged no fee in the EU. In addition, HBOS (Halifax, Intelligent Finance and Bank of Scotland) has made a slightly more subtle change by increasing their exchange rate loading fees from 2.75% to 2.95%.”
Naylor concludes: “We would like to see credit card companies focus their energies on educating consumers about the benefits of the legislation rather than fighting to scrap it. The use of credit cards abroad is already a lucrative part of their business and this is just a further incentive for consumers to use their cards for purchases overseas.”
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